1.3.1 Types Of Market Failure

Question 1

What is market failure ?

Answer 1

This is when the price mechanism leads to a misallocation of resources. The market is inefficient and leads to a price and quantity not best for society

Question 2

What is partial and complete market failure ?

Answer 2

Partial market failure is when the free market cannot supply products at the price consumers are willing to pay. Complete market failure is when the free market does not supply products at all.

Question 3

How many types of market failure is there and what are they ?

Answer 3

There is 4. These include negative and positive externalities, public goods, information gaps